The retailer plans to invest half of the roughly $550 million a year saved from store closures and job cuts into its digital efforts and other growth strategies

A pedestrian carries a Macy's Inc. shopping bag while walking on Fifth Avenue in New York, March 24, 2016.
Photo:
Bloomberg News

A move announced Wednesday by Macy’s Inc. to shutter dozens of stores and restructure operations may have as much to do with digital technology, as it does with lackluster holiday sales, says one tech industry analyst.

As CIO Journal reported this week, the rapid adoption of cloud, mobile, data analytics and other digital capabilities is forcing many non-tech firms to restructure. Among other changes, new IT capabilities are breaking down barriers between formerly siloed business units, flattening out management structures and streamlining production processes, senior IT managers and industry analysts say.

That’s prompting many companies to adopt new business plans, while redrawing leadership roles and responsibilities.

Macy’s plans to close 63 stores this spring and cut 10,000 jobs amid a similar restructuring of its operations, aiming to “focus resources on strategic priorities, improve organizational agility and reduce expense,” the company said in a statement.

The move is expected to save the retail giant roughly $550 million a year, about half of which it now plans to funnel into its digital business and other growth strategies, a company spokeswoman told CIO Journal. Further details about strategy would be unveiled next month, when the company is set to report fourth-quarter earnings, she said.

Earlier this week, it reported that sales declined 2.1% on a comparable store basis in November and December from a year ago, adding that online sales were strong as a result of ramped up digital efforts. Macy’s had total sales of $27 billion in 2015.

Ted Schadler, vice president and principal analyst at Forrester Research, said companies like Macy’s that embrace digital technology eventually reach a breaking point and are forced to reorganize.

He said retailers that built robust businesses on a physical presence have spent a lot of energy and money on being in the best possible locations. As such, he added, “their entire organization – marketing, sales, fulfillment, distribution, inventory management, staffing – is aligned around that physical presence,” driving their cost structures, management approaches, and technology investments.

But as shoppers increasingly engage these businesses through digital channels, they’re prompting a massive reorganization that is spreading beyond traditional tech units and into “core systems like inventory, supply chain, distribution, and fulfillment,” Mr. Schadler said.

Many companies today, from retailers to bankers, insurers and other goods and service providers, are in the midst of leveraging digital technology to pry legacy systems loose from old business plans and outdated sales channels.